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By STUART LAU
with PHELIM KINE
PRESENTED BY Government Accountability Institute
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HEY CHINA WATCHERS. This is Stuart Lau reporting from the banks of the Danube this Tuesday. Phelim Kine will be with you from the U.S. on Thursday.
NEXT CHAPTER FOR EU DERISKING
URSULA VON DER LEYEN’S LANDMARK CHINA POLICY —The mantra of “derisk, not decouple” — is turning one next month, and the European Commission president is pretty satisfied that the U.S. is following her formulation, including by way of a G7 leaders’ statement.
The strategy seems more relevant than ever as the West is concerned over deepening ties between China and Russia — most recently with Moscow’s revelation of talks on possible yuan loans. We might not be looking at a College of Europe PhD course on Deriskology anytime soon, but the phrase — which covers fears over everything from minerals to futuristic AI — will most probably stay very high on the EU’s agenda. Not least because of her.
Beijing might not want to read this: The Big Derisker herself last week formally sought another five years helming the EU’s powerful executive body. And POLITICO’s Poll of Polls shows that her European People’s Party is very likely to come first in June’s European elections. Von der Leyen made “competitiveness” one of her major election slogans, and some say it’s time for a specific commissioner in her future team in charge of derisking.
**A message from Peter Schweizer: In my 30 years as an investigative journalist, nothing even comes close to what I've uncovered in my new book Blood Money: Why the Powerful Turn a Blind Eye While China Kills Americans.**
It’s the economic security, stupid: Former World Trade Organization Director-General Pascal Lamy said Monday it was time for an Economic Security Commissioner post to be created. His or her job would be to monitor member countries’ behavior — as national security is primarily a national, not European, competence.
Japanization: According to a Jacques Delors Institute report, cowritten by Lamy and Elvire Fabry, the new post — similar to the one that already exists in the Japanese government — is needed to ensure that economic security could be coordinated on the EU level.
At the same time, the report added, “there should be a push to create a format for an Economic Security Council within the EU Council, encouraging all member states to create the position of Minister for Economic Security.”
C’est toi, mon cher Thierry? Earlier, the French EU commissioner for internal market Thierry Breton has been floated as a potential candidate for this new position.
Whoever takes the post will have a hard time convincing business executives to follow the EU’s call…
IT’S TOUGH TO SAY GOODBYE: While two thirds of Europe's CEOs are planning to change their supply chains over the next two to five years, less than two percent plan to leave China, according to a new report issued Tuesday by The Conference Board. "European business leaders are very reluctant to exit China," said Sara Murray, the group’s managing director.
But looking elsewhere: At the same time, Europe’s executives “are more interested than peers in other regions in reorienting supply chains towards friendlier countries,” Murray noted. The survey covers more than 1,200 executives, including more than 630 CEOs.
Still, it’s a slo-mo move: Europe lags behind other major players in going to India as a replacement for China. Germany has seen a record-low level of importing Indian electronics in recent years, in contrast to significant increases by the U.S. and Britain, where Indian exports are increasingly a replacement for Chinese ones, according to a note by Fathom Consulting published last week.
“Progress in [India] gaining market share has been more limited in Europe and Japan, suggesting a move towards dual supply chains (i.e., China plus one) rather than a complete abandonment of China-based production, at least for now,” the note says.
BEIJING SPEEDS UP TO PUSH BACK: The latest lobbying comes from Chinese Foreign Minister Wang Yi, who told German Chancellor Olaf Scholz‘s top advisor Jens Plötner that Europe should not “pursue ‘China exclusion’ in the name of derisking.” Here’s the Chinese readout. (Berlin wouldn’t say much about the meeting, apart from saying it was to talk about international and regional situations as well as German-Chinese relations, according to my colleague Hans von der Burchard.)
UK’S EV TEST BEGINS
SUBSIDY SCRUTINY: Britain is considering whether to investigate Chinese state subsidies for electric vehicle makers, two people familiar with the nascent plans told POLITICO’s Graham Lanktree.
Driving toward tariffs: A U.K. investigation would follow the launch of a similar probe by the EU last October. That probe sparked fury from Beijing, while critics have warned that it could jack up the price of more climate-friendly vehicles during a climate emergency and cost of living crisis.
Diversion fears: Now, British automakers are urging the U.K. government to speed up its own work amid concerns the U.K. will see a flood of Chinese-made EVs diverted into its market from the EU if the bloc slaps duties on imports when its probe wraps up later this year.
Wheels are turning: In the past few weeks "the wheels have started turning," said a senior figure at a major British automaker familiar with the U.K. plans. There is "work behind the scenes to look at what those options might look like," the person said.
Instructions inbound? Trade Secretary Kemi Badenoch is preparing to instruct Britain's trade watchdog, the Trade Remedies Authority (TRA), to open an investigation, said a consultant familiar with the plans.
Getting it right: "Our anticipation is we will look at an application," Oliver Griffiths, chief executive of the TRA said. But the U.K. needs to "make sure that we've got proper data." Graham has the full story here.
MEANWHILE IN ITALY: The government is courting China’s BYD, the world’s biggest EV maker, for a car plant, because Fiat maker Stellantis signaled plans to move out of Italy for lower-cost countries, BYD Europe’s managing director Michael Shu said. Bloomberg has more.
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SANCTION SEASON
ALL DISQUIET ON THE WESTERN FRONT: The U.S., EU and Britain last week sanctioned or blacklisted a group of Chinese companies accused of aiding Russia’s war chest, coinciding with the two-year mark of Moscow’s war against Ukraine.
First of its kind: Europe’s blacklist of mainland Chinese companies is unprecedented, given that the EU had only sanctioned Hong Kong entities.
In Washington: Eight companies were placed under sanctions for "the diversion of controlled microelectronics to Russia's military and intelligence authorities in support of Russia's war in Ukraine," the Commerce Department said in a statement published today.
The sanction listings are Commerce's response to the second anniversary of the start of the Russian invasion of Ukraine and the death last week of jailed Russian opposition leader Alexei Navalny. "China will take necessary measures to firmly safeguard the legitimate rights and interests of Chinese enterprises," China’s Commerce Ministry said in response on Monday.
Surprise, surprise: The Chinese ministry also slammed the EU-U.K. sanction measures for lacking a basis in international law and demanded no further sanctions from Europe against Chinese companies.
Warning: The sanction package “violates the consensus and spirit of the China-EU leaders’ meeting” — referring to the summit between European Commission von der Leyen and Chinese leader Xi Jinping in December — and “will bring about negative impact on China-EU trade and economic relationship.”
The Chinese Foreign Ministry put it even more bluntly. In a press conference on Monday, ministry spokesperson Mao Ning said it was none of the West’s business when Beijing and Moscow decide to deepen trade ties.
TRANSLATING WASHINGTON
CHINA'S WTO COMPLIANCE SPARKS BILATERAL BICKERING: Beijing has hit back at a scathing U.S. Trade Representative report criticizing China's failure to comply with World Trade Organization rules. The USTR assessment "ignores the great achievements made by China in fulfilling its WTO commitments … reverses black and white, puts the label of 'active decoupling' on China’s response to the U.S. embargo and suppression, and falsely claims that China has created overcapacity,'" China's Commerce Ministry said in a statement published Monday. USTR accused Beijing of using the global trade system to pursue "global market domination" in certain industrial sectors. "China still embraces a state-directed, non-market approach to the economy and trade" which harms "workers, businesses, and industries in the United States and around the world," USTR Katherine Tai said in the 2023 Report to Congress on China's WTO Compliance published on Friday.
U.S.-CHINA TENSIONS RISE AROUND KIRIBATI: The U.S.-China rivalry for influence among Pacific Island countries has surged in recent days around the country of Kiribati. A U.S. Coast Guard vessel with accompanying Kiribati police personnel stopped and searched two Chinese fishing vessels in Kiribati waters earlier this month, Reuters reported on Monday, citing a Coast Guard official. That search didn't reveal any illegal activity. The Biden administration has tried to offset China's diplomatic inroads in the region by deploying Coast Guard vessels and personnel to identify and stop illegal, unreported and unregulated fishing that is devastating Pacific Island counties' fish stocks. The ship interception disclosure follows a report last week that Beijing has deployed Chinese police personnel to Kiribati to assist local police with "in community policing and a crime database program."
BURNS: U.S.-CHINA RELATIONSHIP 'MOST DANGEROUS’: U.S. Ambassador to China Nicholas Burns warned on Sunday that heightening geostrategic competition with China makes the U.S. relationship with Beijing the world’s "most dangerous."
"They want to become and overtake the United States as the dominant country globally. And we don’t want that to happen. We don’t want to live in a world where the Chinese are the dominant country," Burns said on CBS' 60 Minutes on Sunday. Burns said the bilateral stressors include ongoing Chinese military harassment of Taiwan and rising tensions between Chinese and Philippine naval forces in the South China Sea. And those tensions are unlikely to ease for the foreseeable future because "the greater energy is with those on the national security side of the government of China," Burns said.
Those comments "reveal the deep-seated Cold-War mentality and hegemonic mindset of some in the U.S. — China never bets against the U.S., and has no intention to challenge or unseat it," said Chinese Embassy spokesperson Liu Pengyu on Monday.
CHINA'S DIPLOMATIC NETWORK SURPASSES U.S.: Beijing has surpassed the U.S. in its number of diplomatic outposts for the fifth consecutive year, according to a new report. China boasts "274 posts in its global network, followed closely by Washington with 271" said the Australia-based Lowy Institute's latest Global Diplomacy Index published on Sunday. While the U.S. has the diplomatic edge in Europe and South and Central America, China "has a larger diplomatic footprint than the United States in Africa, East Asia, the Pacific Islands countries and Central Asia," the report said.
KRITENBRINK'S ASEAN ROADSHOW: Daniel Kritenbrink, assistant secretary of State for East Asian and Pacific affairs, is on an 11-day swing through Southeast Asia to press the flesh of key leaders from ASEAN countries. Kritenbrink's trip began on Friday and will take him to Singapore, Cambodia, Thailand, Vietnam and Brunei where he'll "underscore the United States' strong and enduring commitment to its allies and partners in Southeast Asia," said a State Department statement published Friday.
Kritenbrink's travels reflect the Biden administration's efforts to sharpen its diplomatic game in the region in the face of stiff competition from Beijing. That includes President Joe Biden's pledge of "a new era in U.S.-ASEAN relations" at a meeting of ASEAN leaders in Washington in 2022.
TAIWAN 'EXTREMELY WORRIED' ABOUT U.S. COMMITMENT: Taiwanese senior officials repeatedly questioned members of a visiting U.S. congressional delegation on what stalled aid to Ukraine means for U.S. commitments to defend the island from potential Chinese aggression. Those same officials are also worried about the implications of a potential Trump victory in the U.S. presidential election in November on U.S. support for Taiwan. "Taiwan is extremely interested in Ukraine, and extremely worried that we might walk away from Ukraine," Rep. Mike Gallagher (R-Wis.), chair of the House Select Committee on China, told reporters on Friday at the end of a three-day delegation to the self-governing island. Phelim has the full story here.
Looking at you, Elon: Gallagher is also concerned about reports he heard while in Taiwan that the Starshield network, a military version of the Starlink satellite internet system developed by Elon Musk's SpaceX, is denying service to the island. That has prompted Gallagher to ask Musk to brief the committee on Starshield availability to Taiwan in the next two weeks, Forbes reported on Saturday. Gallagher also urged his fellow lawmakers to pass stalled legislation that delivers funding to U.S. Pacific island allies Palau, Micronesia and Marshall Islands who are facing what he described as "an onslaught of economic coercion and political influence" from Beijing.
IN HEADLINES
BBC: Chinese visitors allegedly barred from Airbus German military plane.
New Yorker: Inside North Korea’s forced-labor program in China.
Reuters: Satellite images reveal floating barrier at mouth of disputed atoll in South China Sea.
TIME: Red China isn't 'back' under Xi Jinping. It never went away.
Washington Post: Chinese firm’s leaked files show vast international hacking effort.
MANY THANKS: To editor Christian Oliver, reporters Graham Lanktree, Hans von der Burchard and producer Seb Starcevic.
**A message from Peter Schweizer: It's often said that China is in a cold war with America. The reality is far worse: the war is hot, the body count is one-sided, and America's elite are complicit. My new book Blood Money: Why the Powerful Turn a Blind Eye While China Kills Americans exposes corruption on both sides of the aisle and corporate malfeasance from America's financial behemoths. As is my investigative trademark, Blood Money is packed with hard evidence and relies on zero unnamed sources. You'll be hearing about these revelations for months to come. Get your copy to learn about tomorrow's headlines today.**
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